India’s RoDTEP Scheme for Exporters: Key Extensions and Compliance Updates

In a significant move to enhance India’s export competitiveness, the central government extended the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme in October this year.

These extensions reflect the government’s commitment to strengthening the export sector by providing relief from unremitted taxes and levies that burden exporters.

Revised refund rates to align with budgetary limits

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Starting October 10, 2024, the RoDTEP scheme will operate with revised tax refund rates, ranging between 0.3 percent and 3.9 percent of the export value. These rates are slightly reduced from the previous range of 0.5 percent to 4.3 percent, a step taken to ensure the scheme’s budgetary outgo remains within the limits set under the Foreign Trade Policy 2023.

The Directorate General of Foreign Trade (DGFT) emphasized that these revisions are part of an ongoing effort to align the scheme with fiscal objectives while maximizing its impact. Adjustments may include modifications to eligible items, rate structures, and value caps to maintain the scheme’s financial viability.

Industry reaction: A step toward greater global competitiveness

The industry has broadly welcomed the extension of the RoDTEP scheme. Sanjay Budhia, Chairman of the CII National Committee on EXIM, commended the government’s proactive stance, highlighting that the scheme reduces exporters’ cost burdens and enhances their ability to compete in international markets.

He noted that this extension addresses critical issues of unrefunded taxes and duties, enabling exporters to participate more effectively in global value chains. It is a timely and much-needed measure to support export growth.

Similarly, Ashwani Kumar, President of the Federation of Indian Export Organisations (FIEO), noted that the extension brings stability to exporters who can now finalize contracts with pricing clarity, factoring in the expected duty refunds. Kumar also called for making the scheme permanent, akin to other duty-neutralization programs, to offer long-term predictability for exporters.

Compliance requirements tightened for exporters

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To streamline operations and ensure accountability, the government has introduced stricter compliance measures for exporters under the scheme. Effective from FY 2023-24, exporters claiming RoDTEP benefits must file an Annual RoDTEP Return (ARR) through the DGFT portal by March 31 of the following financial year. The requirement initially applies to those with annual RoDTEP claims exceeding INR 10 million across all 8-digit HS codes.

Non-compliance consequences:

• Exporters failing to file the ARR by the deadline will face denial of RoDTEP benefits. Additionally, no further scrolls of pending claims will be processed beyond a three-month grace period (ending June 30).
• For late filings up to June 30, a composition fee of INR 10,000 will apply. After June 30, this fee increases to INR 20,000.
• Claims will resume within 45 days of fee payment, subject to compliance verification.

Exporters must also retain physical or digital records of claims for five years, ensuring transparency during audits. This regulatory tightening aims to improve the accuracy of tax assessments and prevent misuse of the scheme.

Economic impact and budgetary significance

Since its launch in January 2021, the RoDTEP scheme has played a crucial role in supporting Indian exports. In FY 2022-23, it facilitated exports worth US$450 billion, incurring a fiscal cost of INR 130.2 billion. By comparison, FY 2021-22 exports under the scheme amounted to US$421 billion, with an outlay of INR 121 billion.

Despite the downward revision in rates, the government believes that the extended timeline and continued support under the scheme will enable exporters to remain competitive globally. The move is expected to help India sustain its export momentum, contributing to the country’s broader goal of achieving a US$1 trillion export target by the end of the decade.

Strategic importance of RoDTEP

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The RoDTEP scheme replaces the earlier Merchandise Exports from India Scheme (MEIS) and addresses critical issues of unremitted taxes, including value added tax (VAT) on fuel, mandi taxes, and electricity duties, which were not reimbursed under other mechanisms. By reimbursing these embedded costs, the scheme effectively “zero-rates” exports, aligning with international trade norms.

The government’s decision to extend the scheme reflects its intent to support exporters during a period of global trade uncertainties. The revised rates and compliance measures indicate a balanced approach—providing fiscal relief to exporters while adhering to budgetary discipline.

Outlook

The extension and updates to the RoDTEP scheme come at a time when global trade is facing challenges such as supply chain disruptions and protectionist policies. By addressing embedded costs and leveling the playing field for Indian exporters, the scheme is poised to enhance India’s competitiveness in global markets. However, as exporters adapt to the revised rates and stricter compliance norms, their ability to innovate and optimize costs will play a critical role in determining the scheme’s success.

The government’s proactive measures, coupled with industry cooperation, signal a positive trajectory for India’s export sector, reinforcing its position as a key player in global trade.

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